Input-Process-Output and Executive Bonus— Should we be outraged?

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The public is generally outraged at executives receiving bonus at the firms that had received bailout money. At first, this outrage seems "fair" but it is worthwhile to think about the nature of work in the knowledge economy in terms of input-process-output.

In the industrial old world manufacturing involved procurement-processing-marketing. If your firm made money you added more processing, you expanded markets and procured globally. Now when you contract global manufacturing the equation changes in manufacturing. The problem is more confounded in service industries like insurance and banking. One end of the firm seeks input customers who have a customer service process (including the recent issues  like unqualified mortgages,  credit card penalty charges, declining medical insurance for pre- existing conditions etc.). The output side of this industry includes investment (including the ill conceived debt swap instruments).

Because all these activities do involve creativity,higher levels of knowledge and  knowledge integration they need to be rewarded appropriately. You cannot learn innovation and management in these fields in only a classroom.Managerial minds need to wrestle daily with the vexing problems of
globalization and the even more spectacular opportunities in the
input-process-output chains of organizations. Yes, there should be punitive control for mistakes like the misuse of debt swaps but lowering remuneration is likely to hurt the growth of knowledge and expertise that is required in the knowledge economy.  Good pay and solid performance based bonus with accountability for mistakes may be the way to go.

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